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IA businesses decry proposed $10-hour minimum wage

2/16/2012

By Lynn Campbell  |  IowaPolitics.com

DES MOINES ? Iowa workers who make minimum wage would get a 38 percent pay raise under a proposal advanced Thursday by Senate Democrats.

The state would increase its minimum wage from $7.25 to $8.75 in July, and to $10 in January under Senate File 2040, approved 2-1 by an Iowa Senate Labor and Business Relations subcommittee. That?s an annual pay of $20,000 a year, up from $14,000 a year.

?I believe that we?re actually going to harm the economy by pushing the minimum wage past the threshold that the federal government recommends,? said state Sen. Mark Chelgren, R-Ottumwa, who is president and owner of two businesses.

Iowa?s minimum wage was last increased in July 2009 from $6.55 an hour to $7.25 an hour, to mirror an increase in the federal minimum wage.

?This isn?t going to lift anybody out of poverty, but it?s going to help keep the lights on, help keep the car running,? said Charlie Wishman, secretary and treasurer for the Iowa Federation of Labor, AFL-CIO, which represents more than 50,000 members of 520 unions.

?We raise the minimum wage and it?s economic development, because this money is spent ? it?s either saved for tuition or put back immediately into the economy, said Sen. Dick Dearden, D-Des Moines. It goes back on Main Street. It does good for local businesses.?

But following the 2009 increase, more than 500,000 jobs were lost, said John Gilliland, senior vice president for government relations for the Iowa Association of Business and Industry, the state?s largest business trade group representing 1,400 Iowa businesses that employ more than 300,000 Iowans.

The increase also led 58 percent of restaurants to increase their menu prices; 41 percent to reduce employee work hours; 26 percent to postpone plans for new hiring and 24 percent to reduce their number of employees, according to the National Restaurant Association, which represents more than 380,000 restaurants and others in the food service industry.

?There are ripple effects sometimes, beyond just raising the minimum wage, for the rest of the population,? said Craig Walter, a lobbyist for the Iowa Restaurant Association, which represents more than 6,000 restaurants and bars. ?It?s something we would like to avoid.?

Walter said businesses have just experienced one of the largest economic downturns in 80 years and are ?crawling out of that hole.? He said profit margins are running only 2 percent to 4 percent. An increase in the minimum wage would eat into that.

?If you start increasing the minimum wage, my small guys are basically scraping by … Any kind of adjustment, they won?t hire that high school kid. They?ll just do the work themselves,? said Kristin Kunert, state director for the National Federation of Independent Business, which represents more than 10,500 Iowa small businesses, each with an average of 15 employees. ?It is hurting the people they want to help.?

Kunert said only a very small percentage of small businesses pay the minimum wage. Most pay more. But she said small businesses would have a more difficulty than big ones in absorbing the increased costs. 

?Larger companies have an HR department,? she said. ?My guys have grandma doing the books.? 

Chelgren also said he pays more than minimum wage to all 14 employees at his two businesses: Frog Legs, which makes components for wheelchairs; and Fizzix Manufacturing, a urethane manufacturer that specializes in durable medical equipment.

As many as 85 percent of those who earn the minimum wage are teenagers, Gilliland said, citing data from the Employment Policies Institute, a Washington, DC-based nonprofit research organization that studies public policy issues surrounding employment growth. He said those teens lose job opportunities each time the minimum wage is increased.

But state Sen. Thomas Courtney, D-Burlington, said 76 percent of workers who earn at or near the minimum wage are adults 20 or older. His data came from the National Employment Law Project, a national advocacy organization for employment rights of lower-wage workers

?I don?t believe that there?s any proof that the minimum wage makes businesses go under,? Courtney said.

Gilberto Garcia, 23, is among those adults getting paid $7.25 an hour. He works at a Burger King in Des Moines and described the minimum wage as ?so-so.?

?It?s OK when you need the job. It?s OK,? Garcia said.

Despite Thursday?s passage of Senate File 2040 by a subcommittee of the Democratic-led Senate, the bill isn?t expected to go far. The Republican-controlled Iowa House does not support the bill.

?I?m not naive enough to think it?s going to go anywhere on the other side,? Courtney said, referring to the Iowa House.

Iowa House Speaker Kraig Paulsen, R-Hiawatha, said he favors a different approach to increasing jobs and improving the economy.

?If you?re interested in putting Iowans back to work, then you need to make it easier to be an employer in the state of Iowa, not harder,? Paulsen said. ?So that is where we?re focusing our attention.?

See Senate File 2040:

http://tinyurl.com/6pu6deu

Tags: Businesses